The multi-layered tax structure arrived at for the Goods and Services Tax (GST) is welcome though it could be fraught with problems and disputes in its implementation. But in a country like India, which has rich, poor and middle and lower middle income groups, the idea of one tax fits all would not be equitable. Highly developed countries with no or little economic disparity can afford to have one common tax. The GST council headed by the Union finance minister Arun Jaitley has done well to leave the common man unhurt by higher taxes by leaving foodgrains and items of mass consumption outside the purview of the GST.
It is said that the incidence of indirect taxes may also come down, but the proof of the pudding is in the eating, so one will have to wait for its implementation next year to see how this works out. What is more relevant to the aam aadmi, however, is to know which products fall under which tax bracket. For instance, in the case of white goods like refrigerators and washing machines, things considered a luxury some decades ago are taken as necessities today. So it will be interesting to see what the decision will be on these issues. The same goes for luxury car. It’s not clear whether the tax on these would be decided on the price or the length of the car and engine capacity. The overall objective clearly is that it should not stoke the fires of inflatio.
There is however concern on the service tax which is currently at 14 per cent and is expected to move between 12 to 18 per cent. It is all very discretionary and it is hoped that consumers of these services will not suffer under the new regime. The devil is in the details it is said, and the committee of secretaries is expected to give their decision by the end of this year. This will give a chance to companies like those in the auto sector to decide their production patterns. It is amusing that the council could not resist the temptation of adding a cess over and above the highest tax slab on so-called high-end “sin goods” and one wonders how morality comes into this. Paan masala, tobacco, cigarettes, etc., are more related to health issues than the wellbeing of the soul. Luxury car dealers are upset at being put in the same category and understandably so. But this apart, the overall objective of a common tax — one country one tax — is welcome. It is expected to add to the government’s coffers whilst simplifying the current complex system. It will also contribute to the ease of doing business.
